Deductive value

A shipment’s deductive value is assessed by customs and is based on the price at which independent buyers purchase the same product in the importing country.

In some territories, such as the United States, the use of the deductive value method is governed by certain conditions. For example, the product must be sold within 90 days from the date of importation. This ensures that customs is apprised of the product’s value for duty purpose at the soonest possible time.

The computation for a shipment’s deductive value falls under the wider scope of customs valuation. Familiarity with customs valuation is particularly important for importers, as this allows them to make informed decisions to help minimize the cost of imported products. Importers should also be familiar with the list of items or elements which are non-dutiable, in order to maximize the reduction of declared values while still acting within legal limits.

Ascertaining the value of good presents a particularly tricky challenge because an item may be valued differently by different parties involved in a transaction. For instance, a manufacturer sees the value of a product in terms of the cost of production, while an end user may see it as the price paid for is purchase. In the same way, customs may appraise goods differently, which is why a set of standards is determined. This is decided on by the Customs Act of the particular country or state, which is largely based on international regulations, as well.

Some consulting firms specialize in providing expert advice to importers in the area of customs valuation. Such agencies can help businesses avoid legal problems in transfer pricing and taxation.